Question 1

When the race among rivals for industry leadership is a marathon rather than a sprint,

Accepted Answer

A)   it is best to be a fast follower rather than a first mover or a slow mover.
B)   fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own.
C)   a slow mover may not be unduly penalized and first-mover advantages can be fleeting.
D)   being a first mover generally entails relatively low risk and carries a potentially big advantage.
E)   there are nearly always big advantages to being a slow mover rather than an early mover, especially as concerns avoiding the "mistakes" of first or early movers. C

Question 2

Which one of the following is not a good example of a defensive strategy to protect a company's market share and competitive position?

Accepted Answer

A)   Adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to opportunity-seeking challengers
B)   Thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced options of its own
C)   Engaging in a preemptive strike strategy in an effort to discourage rivals from being aggressive
D)   Signaling challengers that retaliation is likely in the event that they launch an attack
E)   Making early announcements about impending new products or price changes to induce potential buyers to postpone switching C

Question 3

Which of the following is a potential defensive move to ward off challenger firms?

Accepted Answer

A)   Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to buyers to help discourage them from experimenting with other suppliers/brands
B)   Signaling challengers that retaliation is likely in the event they launch an attack
C)   Making an occasional strong counter-response to the moves of weak competitors to enhance the firm's image as a tough defender
D)   Maintaining a war chest of cash and marketable securities
E)   All of these E

Question 4

Experience indicates that strategic alliances

Accepted Answer

A)   are generally successful.
B)   work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency.
C)   work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies.
D)   stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals.
E)   are usually a company's best approach to building a distinctive competence.

Question 5

Which of the following is not a strategic disadvantage of vertical integration?

Accepted Answer

A)   Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later.
B)   Integrating backward into parts and components manufacture can impair a company's operating flexibility when it comes to changing out the use of certain parts and components.
C)   Vertical integration limits a company's ability to achieve greater product differentiation and to exercise direct control over the costs of performing value chain activities.
D)   Forward or backward integration often calls for radically different skills and business capabilities than the firm possesses.
E)   Vertical integration poses all kinds of capacity-matching problems.

Question 6

A vertically integrated firm is one that performs value chain activities along more than one stage of the industry's overall value chain and such integration is not considered to be

Accepted Answer

A)   backward integration (industry value chain activities performed previously by buyers) .
B)   either partial integration (building positions in selected stages of the value chain)  or tapered integration, which is a strategy that involves both outsourcing and performing the activity internally.
C)   tapered forward (e.g., engaged directly in the sales operating activity to end users at the same time selling to third parties) .
D)   full integration (participating in all stages of the industry vertical chain) .
E)   forward integration (value chain activities performed by distributors)  or forward toward end users.

Question 7

A strategic alliance

Accepted Answer

A)   is a collaborative arrangement where companies join forces to defeat mutual competitive rivals.
B)   involves two or more companies joining forces to pursue vertical integration.
C)   is a formal agreement between two or more companies in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and mutual dependence.
D)   is a partnership between two companies that is typically intended to eliminate the need to engage in outsourcing.
E)   is usually a cheaper and more effective way for companies to join forces than is merger.

Question 8

Which one of the following is not an offensive strategy option?

Accepted Answer

A)   Adopting or improving on good ideas of other companies (rivals or otherwise) 
B)   Deliberately attacking those market segments where key rivals make big profits
C)   Launching a preemptive strike to capture a rare opportunity
D)   Offering an equally good or better product at a lower price
E)   Introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals

Question 9

Being first to initiate a strategic move can have a high payoff in all but which one of the following instances?

Accepted Answer

A)   When pioneering helps build a firm's image and reputation with buyers
B)   When first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C)   When early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D)   When moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E)   When pioneering leadership is more costly than followership

Question 10

First-mover advantages are unlikely to be present in which one of the following instances?

Accepted Answer

A)   When pioneering helps build a firm's image and reputation with buyers
B)   When first-time customers remain strongly loyal to pioneering firms in making repeat purchases
C)   When early commitments to new technologies, new-style components, new or emerging distribution channels, and so on can produce an absolute cost advantage over rivals
D)   When moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E)   When rapid market evolution (due to fast-paced changes in technology or buyer preferences)  presents opportunities to leapfrog a first mover's products with more attractive next-version products

Question 11

A company's menu of strategic choices to supplement its decision to employ one of the five basic competitive strategies does not include

Accepted Answer

A)   whether and when to employ defensive strategies to protect the company's market position.
B)   whether to integrate backward or forward into more stages of the industry value chain.
C)   whether to employ a preemptive strike type of green ocean strategy.
D)   whether and when to go on the offensive and initiate aggressive strategic moves to improve the company's market position.
E)   whether to bolster the company's market position via acquisition or merger and/or whether to enter into strategic alliances or partnership arrangements with other enterprises.

Question 12

Which one of the following is an example of an offensive strategy?

Accepted Answer

A)   Blocking the avenues open to challengers
B)   Signaling challengers that retaliation is likely
C)   Pursuing continuous product innovation to draw sales and market share away from less innovative rivals
D)   Introducing new features or models to fill vacant niches in its overall product offering and better match the product offerings of key rivals
E)   Maintaining a war chest of cash and marketable securities

Question 13

Which one of the following is not a strategically beneficial reason a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products?

Accepted Answer

A)   To acquire or improve access to new markets
B)   To expedite the development of promising new technologies or products
C)   To enable greater vertical integration
D)   To improve supply chain efficiency
E)   To overcome deficiencies in technical and manufacturing expertise and to create desirable new skill sets and capabilities

Question 14

Which one of the following statements about backward vertical integration is false?

Accepted Answer

A)   What makes backward vertical integration such an attractive strategic option is the opportunity to capture the profit margins of suppliers and thereby increase the company's own profitability.
B)   Backward vertical integration can produce a differentiation-based competitive advantage when a company, by performing activities internally rather than utilizing outside suppliers, ends up with a better-quality product/service offering, improves the caliber of its customer service, or in other ways enhances the performance of its final product.
C)   For backward integration to be a viable and profitable strategy, a company must be able to (1)  achieve the same scale economies as outside suppliers and (2)  match or beat suppliers' production efficiency with no drop in quality.
D)   The best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have outsized profit margins, where the item being supplied is a major cost component, and where the requisite technological skills are easily mastered or can be gained by acquiring a supplier with the desired technological know-how.
E)   Potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity.

Question 15

Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions?

Accepted Answer

A)   To gain quick access to new technologies or other resources and capabilities
B)   To create a more cost-efficient operation out of the combined companies
C)   To fundamentally alter a company's trajectory and improve its business outlook
D)   To expedite shifting from one strategy to another and gain better access to additional financial capital
E)   To extend a company's business into new product categories and/or expand a company's geographic coverage

Question 16

For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must

Accepted Answer

A)   have considerable expertise in supply chain management, transportation logistics, and inventory control techniques.
B)   be able to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality.
C)   have large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components.
D)   have core competences in R&D, product design and engineering, and distribution logistics so that it will have adequate capabilities to produce and distribute parts and components in a timely and cost-effective manner.
E)   have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.

Question 17

The strategic impetus for forward vertical integration is to

Accepted Answer

A)   gain better access to end users, improve market awareness, and/or include the end user's purchasing experience as a differentiating feature.
B)   the opportunity to capture the profits being earned by forward distribution allies (and thereby increase the company's own profits) .
C)   reduce or eliminate disruptions in the delivery of the company's products to end users.
D)   avoid channel conflict.
E)   expand a company's geographic coverage.

Question 18

The two best reasons for investing company resources in vertical integration (either forward or backward) are to

Accepted Answer

A)   speed entry into foreign markets and/or exercise stronger control over operating costs.
B)   broaden the firm's product line and/or enable the company to charge a premium price for its product/service.
C)   gain a first-mover advantage in adopting new production technologies and/or employ potent defensive strategies.
D)   strengthen the company's competitive position and/or boost its profitability.
E)   achieve greater product differentiation and/or gain better access to prospective buyers.

Question 19

The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to

Accepted Answer

A)   expand into foreign markets and/or control more of the industry value chain.
B)   broaden the firm's product line and/or avoid the need for outsourcing.
C)   enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain.
D)   strengthen the company's competitive position and/or boost its profitability.
E)   achieve product differentiation and/or lengthen the company's value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.

Question 20

Launching a preemptive strike type of offensive strategy entails

Accepted Answer

A)   cutting prices below a weak rival's costs.
B)   moving first to secure an advantageous competitive assets that rivals can't readily match or duplicate.
C)   using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals.
D)   attacking the competitive weaknesses of rivals.
E)   leapfrogging into next-generation products and technologies, thus forcing rivals to play catch-up.

Exam 6: Supplementing the Chosen Competitive Strategy-Other Important Strategy Choices